Where now for FANG stocks?

Vaccine news prompted investors to flood back to value stocks yesterday, but is the great rally in FANG stocks over as a result?

Tech suffers as value surges

Yesterday’s remarkable bounce in stock markets saw one big area left out of the party. Tech stocks suffered a poor day, with the Nasdaq 100 reversing on the day having leapt higher along with everyone else.

On many measures, high-growth names suffered their worst performance in months. FANG stocks, for so long the big winners, saw their worst day against the ‘average’ S&P 500 stock in four years, with a gap of almost 8%, while the Dow Jones enjoyed its best performance against the Nasdaq in twenty years.

The big winners from Monday’s soar away gains were those sectors that have suffered most in recent months, such as banks, travel stocks and energy names. These sectors have suffered heavily thanks to expectations of weaker demand for holidays, a drop in oil consumption and record-low interest rates. The vaccine news suggests that there will be some reversal in each of these trends, even if that reversal is some way off.

Is that it for FANG stocks?

As is the way of markets and the financial media, there was no shortage of commentators willing to declare the great ‘long FANG’ trade dead. On a short-term time frame, it does look like the big post-March rally in these stocks is at an end. But even on a five-year time frame yesterday’s weakness barely even registers.

FANG was a popular trade long before Covid-19, and with good reason. These big tech stocks have been market stars for years, thanks to their commanding market share and impressive levels of cash generation. In a world of low yields, high-growth stocks have been very much in demand.

Growth vs value

Are things about to change? Is value finally due to catch up with growth in terms of performance? Certainly, a steepening yield curve would support the idea of stronger growth in the economy and higher inflation, which may drive investors towards other sectors than technology.

But to keep things simple, most trends go on much longer than anyone expects. We might finally be at the point where the big tech rally begins to weaken, but the tech giants are still compelling investments even in a changing world. It would be silly to cut them out of a portfolio now on one day’s worth of vaccine news. It would be even more foolish to begin shorting them without clear evidence of a deterioration in fundamentals and/or their current bullish price momentum.

Learn more about how to trade stocks

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.